Standing Committee A

[Mr. Win Griffiths in the Chair]

State Pension Credit Bill [Lords]

Clause 9 - Duration of assessed income period

Amendment proposed [this day]: No. 37, in page 7, line 4, at end add— 
'(6) For the avoidance of doubt, and notwithstanding regulations made concerning absence from Great Britain under section 1(5), the assessed income period shall continue through any period of absence from Great Britain during that period.'.—[Mr. Boswell].
 Question again proposed, That the amendment be made.

Ian McCartney: Good afternoon, Mr. Griffiths. It is nice to see you back in the Chair. We had some fun while you were away. The hon. Member for Hexham (Mr. Atkinson) got a grip of us in the end and sorted us out, so we learned our lesson from this morning's sitting.
 Before we broke for lunch, I said to the hon. Member for Daventry (Mr. Boswell) that his remarks made this look like the Ronnie Biggs amendment. I want to withdraw that remark and imputation unreservedly. I realise that this is a probing amendment—we could call it an easyJet amendment.

Tim Boswell: The immediate predecessor of the person who lives in the house in which I now live in my constituency was an amateur aviator, who distinguished himself by going up in his plane and spotting the great train robbers in the vicinity, carrying out their activities at Linslade farm. Although that has no direct relevance to the slur that the Minister has now withdrawn, I thought that it might amuse the Committee.

Ian McCartney: I congratulate the hon. Gentleman on knowing someone famous. I hope that I will be able to recount such a story one day.
 The effect of the amendment is best illustrated by an example. If a pensioner goes to Spain for three months over the winter, his entitlement to pension credit ceases after four weeks and the claim is closed. Under our proposed rules, on his return, he would reclaim the pension credit, the income would be reassessed and a new assessed income period set. However the effect of the amendment would be to keep the original assessed income period running in the background when the claim closed, so that any remaining period would still apply on reclaiming. In effect, this is a taxi rank proposal, whereby the meter keeps running until the person comes back.

Tim Boswell: For the avoidance of doubt, let me say that it was my intention not that the entitlement for the weeks of absence should stack up, but that the weekly entitlement should be reactivated on return, as if the person had never been away.

Ian McCartney: I can see why the amendment
 might have some appeal. Arguably, such a mechanism might facilitate a more seamless reintegration back on to pension credit—and seeing as I have been advocating that in Committee, I want to maintain my consistency. It would also prevent the person's pension credit from being reduced when he returned home and reclaimed because he had won the lottery, either English or Spanish. Of course we are ignoring lottery wins during the assessed income period not because we think that such people need pension credit, but because we want to reduce intrusiveness for all recipients of pension credit. We can live with ignoring a few individuals' good fortune for the sake of simplification for the overwhelming majority of pensioners.
 If a new pension credit claim is needed, it would seem perverse not to take that opportunity to reassess the claim there and then. I doubt whether the taxpayer, the lottery winner or the hon. Gentleman would consider that to be unreasonable. 
 On the point of seamless reclaiming, a person who returns to Great Britain would obviously need to contact the Pension Service in order to reclaim. It is therefore debatable that the amendment would make reclaiming easier by ensuring that such a person's income would not have to be reassessed. 
 In designing pension credit, a key consideration has been to keep the system as simple and hassle-free as possible for the customer. That is precisely why we have moved from the intrusive weekly means test to a five-year assessed income period. That is also why we intend strictly to limit the number of changes in circumstances that would require a reassessment of income. Protracted absence abroad is one such instance. We also think it is right when a pension credit claim closes. As I said before, if it is a fresh claim, it seems entirely consistent to make a full assessment. 
 After all, the hon. Gentleman should accept that an individual's circumstances may have deteriorated during that time. When one goes abroad, one spends one's capital. It would seem sensible that, at the point of re-entry into the pension credit, a full assessment should take place, especially as it might be to the advantage of the pensioner. 
 Not all people who go abroad know how long they will be away. For instance, the hon. Member for Canterbury (Mr. Brazier) mentioned a tragic case last Tuesday about one of his constituents, who travelled abroad to visit a terminally ill daughter and ended up having to care for her for years rather than weeks or months. It cannot be very satisfactory to hold closed claims in a kind of limbo pending a reclaim that may or may not occur on a future unspecified date. 
 It is also fair to say that it may be in the claimant's interest for a full assessment to be carried out on return from a protracted absence, because people are more likely to win than to lose out. People who have been abroad for some time are more likely to be in a lower income stream because they have used their savings than they are to have won the lottery in Spain. I ask the hon. Gentleman to withdraw the amendment. 
 Mr. Boswell: The Minister gets an A for the clarity of his explanation, but only a C for acceptability. I am sorry to disappoint him; he is clearly distressed.

Ian McCartney: That is more than I ever got at school.

Tim Boswell: All I can say is that the Minister reminds me of the pupil who received an autumn term report that said, ''Trying'', a spring term report that said, ''Still trying'' and a summer term report that said, ''Still very trying''. The Minister usually does better for the Committee than that.
 The Minister has not addressed the real point. He says—he may be right; I do not contend that—that many people who return from protracted absences abroad may have spent themselves out, and might be better off with a new assessment. However, unless I completely misunderstood him, and even though I missed some of this morning's debate, it seems that it would be open at any time to a disadvantaged pensioner to make a fresh claim. A pensioner who returned to the country could say to the Pension Service, ''I want to make a fresh claim. I have spent myself out. I have gone over the top. I no longer have the money that I thought I had.'' I appreciate that the provision is framed neutrally; it is designed to deal with the pensioners who might lose out. The Minister says that that might be equitable because the assessment made on the return of the pensioner would be processed in accordance with the facts of the matter—for instance, he might suddenly have come into £1 million and it might no longer be appropriate to pay it. 
 My concern relates to the thought processes of pensioners thinking about leaving the country. They may have a certain entitlement to benefit. I am not saying that they go abroad with the prospect of a sudden windfall; there may have been a change in their circumstances before that. However, they are riding on a five-year assessment that cannot be withdrawn. They have a vested interest in the proper sense of the word, but if they have choice of whether or not to go abroad, they may feel inhibited in doing so because it might lose them benefit.

Kevin Brennan: Is the hon. Gentleman not in danger of wanting to have his cake and eat it? Earlier, he said that there should be no reassessment for those who had committed criminal offences and were sent to prison. He is now saying that if someone wins £1 million on the lottery and then decides to go on a world cruise for a year, they should still be entitled to a pension on their return.

Tim Boswell: I understand the hon. Gentleman's argument, but I am saying that other circumstances might pertain; far different from winning £1 million, it could be a matter of pence a week. However, pensioners with hard-won savings who are trying to eke out their savings and other income will be put in a difficult situation if they know that they will lose benefit after going away for four or five weeks. There may even be implications in the European convention on human rights relating to freedom of movement around the European Community. I am not sure that it would be defensible for the free movement of
 individuals to be inhibited by the potential loss or scaling down of a benefit.
 In response to the hon. Gentleman, let me say that I am certain that in moral terms the position is stronger than the one that we discussed earlier in connection with criminals. As I said, the Committee clearly did not want criminals to profit from going to prison—in fact, they would not have profited, but the argument was whether they would adventitiously have lost more than they would otherwise lose in relation to their sentence. 
 We are not discussing only discretionary visits abroad for a holiday, although that may be an attractive idea. As my hon. Friend the Member for Canterbury rightly reminded the Committee the other day, a pensioner may have to go abroad for medical reasons. I do not think that medical treatment abroad under the national health service is excluded under the Bill; indeed, pensioners would lose benefit if they were in a United Kingdom hospital, but after 13 weeks rather than the four that they would have to spend abroad to lose benefit. I add that point to the general confusion that surrounds the provision. A pensioner might also want to support a member of his or her family resident abroad, and it is unfair that pensioners' benefit should be scaled down for such a reason. Someone else who remains in the United Kingdom—a sister or brother, for example—may have had a bigger windfall under the same will but will not lose out because they do not leave the jurisdiction. 
 Although the Minister has tried to explain the provision—I appreciate his good will—I do not think that he has sufficiently answered the question. It would be desirable to provide for a suspending power for the credit as well as for a reapplication for change of circumstance power if the credit were terminated and restarted. The issues are difficult ones and we may want to return to them, perhaps in the context of the regulation. However, perhaps uncharacteristically, I feel strongly on what may seem a technical issue, and I must advise my hon. Friends to vote for the amendment. 
 Question put, That the amendment be made:—
The Committee divided: Ayes 7, Noes 10.

Question accordingly negatived. 
 Question proposed, That the clause stand part of the Bill.

Steve Webb: I do not wish to detain the Committee, but I want to return to a point that we discussed this morning. Under the clause, the
 duration of assessed income period will generally be five years. There are limited exemptions from that but the general principle is that it should be for five years. Will the Minister give some insight into why the Department chose five years? The more I reflect on the matter, the harder it is to see any objective for choosing that particular period. An interval had to be chosen and that was probably as good as any. However, I am seeking clarification about the evidential basis on which it was chosen.
 This morning I said, slightly as an aside, ''Why not 10?'' That was not an entirely facetious comment if the argument is that the process of filling in the form or talking on the phone and giving all one's personal details costs the taxpayer money and is a burden on the individual. That is what the Government are saying—they want to make it as infrequent as possible. Why stop at five years? Presumably there has to be some sort of trade-off. My concern is that if the interval were to be 10 years, circumstances could change so much that the award will be so out of kilter with them as to be inappropriate. The Government's argument is that within five years people will get a letter every year; they will know about anything that has changed and will report it. However, if those mechanisms are good enough, why is there a compulsory five-year point at which there has to be a reassessment?

John Mann: What would the hon. Gentleman suggest instead of five years?

Steve Webb: Had I the resources of the Department to assess such issues, I would ask—I hope that the Minister has asked and will tell us—what assessment the Department has made of, for example, how frequently people's circumstances change. That should inform one's answer to the question that the hon. Gentleman rightly asked. I cannot say that it should be three or seven years; the decision as to how long the period under clause 9 should be informed by evidence, by research into how often pensioners' circumstances change and by how much and by what effect leaving it for a longer or a shorter time would have. It would be helpful if the Minister were to lay before the Committee the evidence on which the decision to specify five years was taken.

Tim Boswell: Briefly, and conscious of the fact that, to my chagrin, I missed a number of the earlier exchanges other than those on the amendment that I moved, let me say that I endorse the points made by the hon. Member for Northavon (Mr. Webb). If we are to form a trade union of interested persons in order to obtain lots of data so as to carry out our research, I shall be one of the first to subscribe. However, there is a serious point here for Ministers. The more information that we have, the more evidence-based it is, the better. Beyond that, I would record for the Committee, as I have not done so explicitly before, the extent to which this is a major change in philosophy. It should, therefore, at least be commented on by the Minister.
 The tradition has been that social security benefits are tied to the week and are about need and short-term need. PAYE and the tax system operate broadly on an annual basis for earnings and ability to discharge 
 responsibilities; there has never been a time scale beyond a year. I am not canvassing the Committee to respond to the implied question of the hon. Member for Bassetlaw (John Mann) that we should seek to substitute one year. However, it would be a more precise means of assessing need and of addressing the kinds of issue that we have discussed in relation to vested interest long-tail assessments going for, perhaps, four and a half years when circumstances change, and the kinds of exchange that we have had about prisoners and persons going abroad. 
 Against that, the Department does not want to spend an inordinate amount on routine reassessment and it does want to identify those who have suffered a significant diminution in income. Lest the Committee be in any doubt, I accept that many pensioners would normally experience a decline in income over the period of their retirement. The tendency would be in that direction rather than the other. 
 I also remind the Committee that the pure doctrine of a weekly set of benefits has been eroded. We would welcome that in relation to things like linking rules and passporting. We are not considering an absolutely pure system. However, we are entitled to ask Ministers to sharpen their thinking, or to reveal it to the Committee, about why we have gone for five years, whether it is sensible and whether it might be subject to modification in the light of experience. Most of the rest of what we on the Opposition Benches plan for the Bill will involve standing back a bit from the text. It is pretty opaque, so that is not a wholly unattractive prospect. We will ask how the Bill is unfolding and whether the doubts that we have expressed were justified. We will try to see whether the Bill is operating in the way in which Ministers intended it to and whether it needs to be modified in the light of experience to make it a more appropriate vehicle for helping pensioners. That is all. The Minister just needs to explain to the Committee why he proposes what he proposes.

Ian McCartney: It is not so much a question of Ministers sharpening up their act. The Opposition have opposed the Bill from the outset. They have opposed the methodology, the concept and the principle behind achieving our aim of tackling pensioner poverty through eradicating it where it exists, preventing it in the future and rewarding thrift.
 The hon. Member for Northavon tries to dress his question up as some big theoretical problem, implying that the Government have to find some empirical evidence to support a process of five-yearly assessment. I do not want to disappoint the hon. Gentleman, but it is called common sense—it is a matter of judgment. We have had discussions and debate with older people's organisations, trade unions and the pensions industry to discover a practical way forward to ensure that the period chosen does not lead to assessments being way out. The five-year strategy is a judgment. We have made a judgment, as simple as that.

Steve Webb: Based on?

Ian McCartney: On the basis that over a five-year period there are economic cycles, and cycles affecting
 public expenditure, income from the stock market, Government expenditure, inflation and people's personal use of their capital assets. The five-year assessment may fall in between those cycles, but at any point the virtuous circle can come into operation and a pensioner can intervene when their circumstances have changed and they require more support under the proposals. They can secure a reassessment.
 That is the important thing here. Rather than just a rigid five-year cycle requiring them to have absolute certainty about their likely income, we give them other important inputs to the process to help them to have some ownership and control over their income. We allow them to have a reassessment during the five-year period when their income has gone down for legitimate reasons. If their income goes up—we had this debate during our consideration of an earlier clause, so I will not go back over it—their assessment remains as it was. We do not remove income from them. That is a clear judgment made by the Government. 
 In the end, all Governments have to make judgments on the political issues of the day. That is the judgment that we made and we will have to stand by it. It will be effective, because we did not just pluck it out of the air—we have held consultations and involved people in the decision, including older people's organisations and the panoply of other organisations involved with this measure. 
 We made that judgment because a five-year period ensures that older people have certainty and clarity, but is not so long as to allow huge variations to impact negatively on them. The judgment was made on the basis of providing older people with support, rather than out of consideration for the system itself. 
 The hon. Member for Daventry may be concerned that we do not have a 50,000 page consultant's report giving us a range of options from one to 99 years, but I should have thought that that would be a bit of a waste of money. He might want to give us one—we could have it for nothing. If he wants us to go for 10, 15 or 20 years, he will have to give us examples of where interventions would take place and why. After any length of time greater than five years, the potential difficulty of the assessments increases. 
 In the end the matter is about judgment. Unlike the Liberal Democrats, we are still prepared to use judgment in such matters. I hope that, if hon. Members are not happy, they will accept that the process has been one of consultation involving proactive consideration and assessment of difficult issues on behalf of older people. 
 It is a clear break with the past. Pensioners are subject to weekly means testing. We also check on their capital and second pensions in three-year reviews. However, their incomes are largely stable, as I said earlier, although there is some capital drawdown. The five-year proposal is sustainable. It has the support of the older people's organisations and of older people themselves. If there is no analysis or evidence leading to a particular decision, in the end it is a question of 
 judgment. I submit my judgment to the Committee and hope that it can accept it. 
 Question put and agreed to. 
 Clause 9 ordered to stand part of the Bill.

Clause 10 - Effect of variations under section 7(4)

Question proposed, That the clause stand part of the Bill.

Maria Eagle: I should like briefly to set out what the provisions in clause 10 mean and give some idea of why we think that general upratings of second pensions are possible in respect of pension credit. Clause 10 resembles, as I am sure that members of the Committee who have been Ministers will know, the routine adjustment provisions in sections 159 and 159A of the Social Security Administration Act 1992. I can see everyone's ears pricking up at that, because they are all familiar with that legislation. The only difference between those provisions, which allow for general uprating, and these, is that these operate only while an assessed income period is in force.
 In practice, the clause allows us to get, annually, an updated view of the retirement provision that must be taken into account in awarding pension credit. I was sorry to miss an earlier debate about this matter because I was attending another pensions debate with the hon. Member for Daventry—pensions debates seem to be popular in the House at the moment. I will try not to go over old ground. 
 In respect of the assessed income period, we are trying to ensure that pensioners do not have to report changes in every little dot and comma of their income and retirement provision every week, which is the current position in respect of income support. However, the period should not be so long—I am sorry to see that the hon. Member for Northavon is no longer in his seat. However, he has left his jacket, so we have every hope that he will return in due course.

Ian McCartney: As long as it is within the assessment period.

Maria Eagle: As long as it is within the next five years, his jacket will still be validly assessed.
 Clause 10 allows us to keep abreast of the retirement provision. That means that although we are abolishing the old weekly means test we will still keep track of where the claimant's provision is, more or less. There will be no sudden end to entitlement after five years. If we just reassessed everything after five years, we might find that the entitlement was out of date. People might lose their pension credit after such a reassessment. The provisions enable us to keep track of where things are going. 
 The clause does not mean that pensioners must start filling in vast forms and sending in reams of details to update our assessment of their retirement provision, because we know, for example, that most second pensions are increased annually, and by what amount. When pensioners first apply, it will be possible for us to ask them when their second pension is uprated and 
 if there are rules on by how much it can be uprated. We will be able to deal with it ourselves without bothering them.

Tim Boswell: The Under-Secretary used the phrase ''second pension'', and by that I think she meant occupational pension rather than state second pension.
 There will be an annual process to deal with notification of uprating to the basic retirement pension as well as any SERPS or state second pension entitlement. If the Under-Secretary works towards such a system, it may eventually be possible to transfer data on occupational pensions across direct from the database, subject to the necessary safeguards, in the same way in which my accountant, for example, knows what my dividends are—there are not that many—even if I have not told him because he has a computer with the relevant data, which can be updated.

Maria Eagle: I confirm that I was talking about retirement provision by means of occupational pensions or other non-state pensions, as defined in the Bill. I reassure the Committee that we shall not end up with assessments that are so far out of date that they are bound to change hugely at the end of five years. That will enable us to deal with known increases in certain elements of pensioners' income without having to bother them about filling in vast numbers of forms. Ignoring increases in second pensions during the assessed income period would mean that pensioners might face a dramatic fall in their pension credit at the end of the five-year period.
 We can take known changes in pensioners' incomes into account, but it does not mean that they will have to fill in vast numbers of forms to enable us to do it. We generally know by how much occupational pensions increase. That is relatively well known, and we can ask people to tell us when they first apply. The Government Actuary, for example, tells us that most occupational pensions are uprated by the retail prices index. We know that half of all pensioner households entitled to pensioner credit will have some kind of occupational pension scheme. We can largely work out what the uprating should be with a little bit of information at the beginning. 
 I hope that that will reassure the Committee that while we are keeping track of increases in retirement provision that have an impact on pension credit, during the assessed income period we will not be getting so far out of date that we will end up with big-bang changes at the end of five years that might overly affect pensioners, and might mean that we are spending far more on pension credit than we would have if we had taken those increases into account. I hope that that explains clause 10 to the Committee. It is about making sure that we can take account of matters during the assessed income period, without the Secretary of State having to make a separate decision on well-known upratings and increases that we know are going to happen.

Tim Boswell: I am grateful to the Under-Secretary for that useful explanation. That is a sensible way in which to go about the process. By way of an obiter to
 that discussion, if she and her Department are to know where they are with pension credits on an annual basis, it is at least a consideration whether the period should be shorter than five years, but I shall not reopen that debate.
 I have one serious point to share with the Under-Secretary, and it is to register a concern about the ability of IT to manage. I mentioned in an intervention that my accountant knows more about any modest dividends that I receive than I do because he has the basic shareholding and can work out what they would be even if they are modified, or the shareholding is modified, because the shares are split. In exactly the same way, I am sure that it would be possible, while of course observing data protection priorities, for the Pension Service to be aware of accruing income that is retirement provision for an individual. It will be able to keep that information on a continuously updated basis. 
 All I say to the Under-Secretary, and I say this in all seriousness, is that the Department's record over the years—I do not exclude the Government of I which I was a part from this—on computer systems has not always been of the highest possible standard. There are concerns that the pension credit will come into effect in autumn 2003 on the old computer system. She may wish to comment now or she may wish to reflect on what I say, but there are still markers to be put down and concerns to be expressed about the robustness of the computer systems. If I may say so—I hope that this is not offensive—it is all a little like motherhood and apple pie, but neither of them might happen.

Patrick Mercer: I note that during discussion of the Bill in another place the noble Baroness Hollis of Heigham talked at length on the need to break with the system of weekly means-testing that has characterised such income-related benefits since the inception of our welfare state. She described the decision to move to a five-yearly income assessment of the pension credit as part of a move to dissociate income support from charity, poverty and means-testing.
 A person currently in receipt of the minimum income guarantee has an ongoing obligation to notify the Department of any change in circumstances. However, pension credit recipients, once a five-year period has begun, will have to notify only major changes. A claimant is not obliged to report changes in retirement provision during the income assessment period, although he or she may report changes that would result in an increased entitlement to pension credit. 
 That situation was described in another place as a win-win prospect for pensioners. I am not entirely convinced of that. I am certainly not convinced that a five-year income assessment period will prove entirely advantageous for our pensioners. My concern centres on how many pensioners, having navigated the treacherous waters of pension credit once, will be persuaded to return should they find their deemed income diminishing as a result of the financial volatility that is such a sign of our times. 
 I return to the example that I quoted last week. I have again this weekend had pensioners coming to my constituency surgeries who are simply unwilling to get involved in that level of complexity. How will pensioners be notified about, or encouraged to apply for, reassessment in order to receive such an increase as the measures provide for? Can the Under-Secretary roughly estimate how many income assessment periods are expected to run for less than five years? In other words, how often will the effects of the variations in clause 7(4) be exercised? 
 We are dealing here with an extremely complex piece of legislation, the purpose of which is, I believe, to introduce more complex choices into an already over-complex system. Our sole purpose should be to protect and support our pensioners, not bamboozle them. I am uncertain whether that is what the pension credit sets out to achieve. Whether pensioners will be encouraged to benefit from the so-called win-win prospect of the pension credit is a key consideration, which demands greater attention than the Government seem prepared to offer it, given the growing evidential basis that suggests there is anything but such a prospect. 
 The publication of the latest statistics on benefit take-up again drew attention to the problem of complexity dictated by the Government. The statistics showed that the take-up of income support was lowest for pensioners, at between 64 per cent. and 78 per cent. by caseload. There is evidence that the percentage of entitled pensioners taking up income support fell between 1998–99 and 1999–2000. In 2000–01, 58,000 eligible pensioners were not receiving income support, yet the Government continue to bombard pensioners with yet more complexity. 
 I recognise what the Government seek to do with such provisions, but many pensioners, if brave enough to enter a claim at the outset, will simply take any money offered with a sigh of relief and affirmation of their intent not to undergo again the trial of application until absolutely necessary. Certainly, everything that I have heard on the street, on the pavement and especially when canvassing for the forthcoming district council elections, leads me to think that.

Maria Eagle: The hon. Member for Daventry asked whether the current IT systems, on which we shall initially operate pension credit, can deal with upratings as provided for in clause 10. We operate millions of benefit claims already. We have a tried and trusted method with which our systems can cope at the moment, and we have no reason to think that our current IT system will be unable to manage the provisions in clause 10.

Tim Boswell: Unless I misunderstood the Under-Secretary's earlier argument, we are talking about not simply uprating the payment of benefit, but taking into account the accruals by way of retirement income from other sources. The ability of that data to transfer into the system, and to drive changes in the benefit system, is relevant. With the greatest respect to the Under-Secretary, there is a difference between altering a
 means-tested, or income-related, benefit such as state pension credit and the annual uprating procedure for the basic retirement pension, which should be a simple mathematical calculation.

Maria Eagle: We naturally considered whether we could cope with that before introducing the Bill. We have no reason to think that our systems would be unable to cope.
 I was not sure whether the hon. Member for Newark (Patrick Mercer) was talking about clause 9, but he mentioned section 7(4) so I think that he was referring to clause 10. For a moment, I thought that he had missed his chance to talk about an earlier clause. He referred to complexity and take-up problems.

Julian Brazier: On a point of order, Mr. Griffiths. May we have some clarification? I thought that we were on clause 10.

Win Griffiths: We are. The Under-Secretary said that she felt that some of the substance of the speech by the hon. Member for Newark was on clause 9, but that he then referred to something in clause 10.

Maria Eagle: I apologise to the hon. Member for Canterbury if I am not speaking clearly enough. I have a bit of a throat at the moment, but will do my best to speak clearly so that he does not misunderstand what I say.
 The hon. Member for Newark again raised the take-up issue. He asked how many pensioners were to have an assessed income period of five years given that there are some circumstances in which it could be shorter. We think that the vast majority of pensioners over 65 will have that assessed income period, and a small minority will have a shorter assessed income period. An example of those who may have a shorter period are those awaiting income streams on retirement, which have not yet been fixed. After they have been fixed, those people can go on to a five year assessment. We may not be able to fix an assessed income period for those with fluctuating foreign pensions. We do not know how many of them there will be until we have worked out the detail of the regulations, but we think that the number will be small. 
 The vast majority of pensioners will experience a claims procedure that has to happen much less frequently. They will see upratings in their retirement provision, which will happen automatically. In some cases, that may result in changes to the savings credit that people receive without them having to go through the process of filling in another form or having onerous obligations to report minuscule changes in income. From a pensioner's point of view, that experience will be less intrusive and more acceptable. 
 We have tried to make it easier for people to claim the minimum income guarantee; for example, we have reduced the claim form from 40 to 10 pages. We are still trying to reduce the types of forms that elderly people in particular have to fill in, because we know that that can be onerous. 
 Once pension credit has been introduced, we think that the experience of pensioners will be much more acceptable, and on that basis we hope to increase 
 take-up, if that is what puts people off from claiming entitlement. We stress that the provision is an entitlement, not a favour. We want to ensure that those who are entitled apply. I hope that I have dealt with some points that were raised. 
 Question put and agreed to. 
 Clause 10 ordered to stand part of the Bill.

Clause 11 - Administration

Question proposed, That the clause stand part of the Bill.

Maria Eagle: I need not detain the Committee long on the clause, and shall deal it with it formally. The clause's purpose is to introduce schedule 1, which we shall reach in due course.
 Question put and agreed to. 
 Clause 11 ordered to stand part of the Bill.

Clause 12 - Polygamous marriages

James Clappison: I beg to move amendment No. 33, in page 8, line 16, at end add
'except in cases where a party to a polygamous marriage has established an entitlement to basic state pension in their own right'.
 It seems that it is up to me to speak about polygamy.

Ian McCartney: I can think of no one better to do it.

James Clappison: I am not one of the 200 people to whom the provision will apply.

Steve Webb: Can the hon. Gentleman confirm that he is talking about 200 polygamous pensioners?

James Clappison: It is a good question whether the 200 refers to units of polygamy, polygamous pensioners or polygamous non-pensioners. I take that figure because it was given in the House of Lords as the number of people to whom the provision could possibly apply. That was an interesting debate, because we also discussed the difference between polygamy and polyandry, which refers to a wife with more than one husband. [Interruption.] The Under-Secretary says that that is much more interesting. She will be interested to hear that polyandry is prevalent in several parts of India, as we found out in the debate.
 A distinct type of polyandry is also practised in Tibet, where a woman who marries the oldest brother of a family may also take his brother as her partner. I do not know what term would be applied to a collection of husbands. Perhaps it would be called a harem or something like that. Some would just call it bad luck. 
 The purpose of the amendment is to probe polygamy, if that is the right way of putting it. The Bill leaves the matter to regulations. I understand that the regulations are already made in respect of minimum income guarantee. The basic approach in such cases will be to ensure that the guarantee part of 
 the pension credit is paid, although it would be interesting to hear more detail from the Under-Secretary as to how much will be paid, and to whom. The amendment deals with subsection (4), which is interesting. It says: 
''Except in relation to the amount of the standard minimum guarantee, any power to prescribe amounts by virtue of this section includes power to prescribe nil as an amount.''
 As that does not apply to the minimum guarantee, the provision must create the power to prescribe nil in respect of the savings element of the pension credit. It would be an interesting exercise to tell someone that they were entitled to something, but that the amount would be prescribed as nil. I should like to hear in what circumstances someone would be prescribed nil as an amount, and I wonder whether the Under-Secretary can throw light on how the provision will apply. We apprehend that it will be relevant to only a limited number of people. For various reasons they are likely in many cases to have low savings and an incomplete pension record, and may be entitled to only the standard minimum income guarantee.

Maria Eagle: I hope that I can assist the Committee, although the hon. Gentleman has removed all the fun that I was going to have describing polyandry, but that is probably just as well.

James Clappison: I have not taken away all the fun, because one matter that was left mysterious in the House of Lords debate was the meaning of polygyny. That was not explained. If the Under-Secretary can explain what that is, I shall listen with rapt attention.

Maria Eagle: I do not have my dictionary with me, so any answer I give would probably be a bit risky. In the context, perhaps it means—no, I will resist the temptation, because it would probably be foolish.
 The hon. Gentleman has admitted that the amendment is probing. If the claimant is a member of a polygamous marriage and at least one partner to the marriage were entitled to basic state pension, nil amounts could not be prescribed in respect of the savings credit and the components of the guarantee credit. However, the power to prescribe nil is a standard power that has been inserted for the avoidance of doubt. Parliamentary counsel does not like doubt. The amendment would not make a major difference. 
 I shall take the opportunity to explain why polygamy must be dealt with under the rules. As the hon. Gentleman will be aware from debate in the House of Lords and other debates, the social security system recognises the validity of polygamous marriages undertaken in countries that permit polygamy. It is, therefore, appropriate for pension credit and other elements of the social security system to make provision to reflect that. As we do not recognise polygamous marriages that take place in countries in which it is against the law, we are dealing with a small number of people who have married abroad in a country in which it is fine to do so and have ended up living here with more than one spouse. 
 The key aspect of our approach is that we are not treating polygamous marriages any more generously for pension credit than a conventional marriage. I am 
 sure that that will enable Committee members to breathe a sigh of relief. In addition, we shall treat polygamous marriages for the guarantee credit as we do for the minimum income guarantee. In the case of the guarantee credit, we shall pay the standard couple rate to the claimant and his first spouse and for each subsequent spouse the difference between the couple rate and the single person rate. For the savings credit, although the guaranteed minimum income will be higher than for a couple, the maximum savings reward will be set at the same amount as for a couple. Therefore we are not extending the maximum savings reward to take account of that small number of people. We believe that that is the most equitable approach to deal with the small number of people who may be involved in such circumstances. The hon. Gentleman referred to a figure of 200. We believe that it is a small number. 
 On the technical point about prescribing nil amounts, as that is a standard power, the amendment would not make a major difference. I shall give an example, if the hon. Gentleman would find that helpful.

James Clappison: The hon. Lady gives a clear explanation, but does it follow from what she says that the second spouse would receive £53?

Maria Eagle: That is almost right. The difference between the couple's rate of £154 and the single person's rate of £100 is £54. I wonder whether there is any point in my going through the example. I shall do so if it might be helpful.

James Clappison: My hon. Friend the Member for Daventry is all agog.

Maria Eagle: I shall ignore the hon. Gentleman's invitation to say something nasty about the hon. Member for Daventry.
 The point at which the income is rewarded and the guaranteed minimum level couple's rate are £123 and £154 respectively. We add to that an amount equal to the couple rate plus the difference between the couple and single rates. That makes the personal guaranteed minimum for a man with two wives £208, giving a minimum income of £208, a maximum savings reward of £18.60—that is, £154 minus £123, times 60 per cent., the little formula to which we have become used. The taper would end at £254.50. The key point is that we are not treating such marriages any more generously for being such marriages. That is the best that we could aim for. 
 My suspicion, which I refused to put on record without a dictionary, that polygyny is the specific term for marriage with more than one wife, has been confirmed by my officials, who clearly have a dictionary and have looked up what polygyny means. I believe that polygamy means having more than one spouse—either a man with more than one wife or a woman with more than one husband. It is the generic term, with polyandry used to refer to the woman with more than husband and polygyny to the man with more than one wife. I hope that that clears 
 up the dictionary questions; it seems a good point to sit down.

James Clappison: I am grateful to the hon. Lady for her explanations, not least the last one about the meaning of polygyny and, indeed, how to pronounce it. She pronounced it much better than I did. We have shed some light on this corner. Some have doubts about polygamous relationships, but we have avoided doubt about how much will be received through savings and pensions credits. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Patrick Mercer: This has been our raciest start yet. I am sorry that so much of the original ground has been swept from under my hon. Friend the Member for Hertsmere (Mr. Clappison) and me.
 In common with other parts of the Bill, clause 12 refers to regulations, which are the appropriate vessel when, following enactment, something is expected to vary over time. Will the Minister explain why we are debating a Bill whose detail is unknown to us in so many respects? If an issue can be decided and is unlikely to vary over time, it should be dealt with in the Bill itself. Why is it necessary to regulate the prescription of the level of pension credit awarded to those involved in polygamous marriages? Similar discussions took place in debates about other pensions legislation—the minimum income guarantee regulations and other income-related benefits, for example, which already make similar provisions. In the regulations proposed for polygamously married households, a special assessment is made of the amount of benefit payable. If the system used for payment of the current minimum income guarantee is deemed reasonable, I am confused about why we are again forced to debate the empty shell of a provision, only to have to fill it in later through regulation. 
 I understand that since August 1998 immigration legislation has prevented a polygamous wife settling in Great Britain with a husband if another is already in the country. Given that the number of polygamous households in Great Britain should diminish over time, surely lengthy discussions of this point are unnecessary and should be cleared up in the primary legislation. Sadly, I can provide no examples, but I should be grateful for clarification.

Maria Eagle: I shall try to deal with the issue that the hon. Gentleman raises. We are following a precedent in referring to polygamous marriages. Some Conservative Members, who were Ministers at the time, might recall section 133 of the Social Security Contributions and Benefits Act 1992, which made similar provision for polygamous marriages and council tax benefit. We are only following a precedent set by the Conservatives.
 We must make it clear that we will deal with the small number of relevant cases. The hon. Gentleman is right to mention changes in immigration rules, which will mean that the number of people affected will not increase, but decrease, over time. However, we wanted 
 to make it clear that the few cases dealt with by the social security system here would be treated in respect of this benefit in the same way as others. The Bill is in many respects a framework Bill, so many regulations will develop out of its provisions to deal with the detail of benefits. As I said, we are following the precedent of the hon. Gentleman's party in including this specific instance in the Bill itself. I hope that that deals with the hon. Gentleman's points. 
 Question put and agreed to. 
 Clause 12 ordered to stand part of the Bill.

Clause 13 - Transitional provisions

Tim Boswell: I beg to move amendment No. 36, in page 8, line 37, leave out from 'regulations' to 'to' in line 39.

Win Griffiths: With this we may discuss amendment No. 34, in page 8, line 40, at end insert
'but without prejudice to the right of that person to request a fresh determination under section 8.'

Tim Boswell: The amendment raises one or two primarily administrative points about the transitional period. I shall follow the numerical order of the amendments and deal first with amendment No. 34, which is relevant to some of the administrative points that I shall touch on in a moment.
 The provision is that an assessed income period—this matter was discussed at length during the enforced absence of the Under-Secretary and myself this morning—may be normally no longer than five years and may be shorter. I am seeking a declaration from the Minister that there will be no circumstances in which a claimant loses out because that period is defined as a longer period. We shall come to the reasons why it is so defined in a moment. I do not think that there will be such a case, but I should like an assurance on the matter. 
 The issue is then about prescribing a longer assessed income period and why that is mentioned. The explanatory notes to the Bill, ever helpful, are quite interesting on that point. The set of arguments are perfectly understandable. The notes explain, for example, that people already on income support will not have to make a fresh application and go through a fresh form and all the rigmarole of a new claim for pension credit. It will be passported, to use a shorthand term, from their existing income support on to their pension credit. 
 I want to make a point of substance on that issue, to which the Help the Aged briefing refers. It quite reasonably says that not everyone who may benefit from the pension credit arrangements is now on the minimum income guarantee or income support. It says, of course, that the savings credit applies only to people over 65, and some may not be eligible for the guarantee credit. That organisation is concerned about protecting the entitlement of such people and providing a fast-track claims procedure for people who are waiting for their benefit. The Minister may like to reflect on that. 
 There is also a general point about the administration of the benefit, which goes back to points that we made in the clause 10 stand part debate about the robustness of the IT systems for the Department. Let us consider the explanatory notes to clause 13(2) and amendment No. 36, which would remove the power to prescribe a longer period. The message from the notes is that many people will be coming on to pension credit in 2003, and on the assumption of a five-year assessment period, they will refresh their claims in 2008. I re-read the explanatory notes and did a double take because I had assumed that they would say 2003, but I read 2008. The Minister may want to comment on that. 
 It seems clear that there will be fewer people to have a renewed assessment period in 2008 than those in 2003. I think that the answer to the conundrum is that many of those in 2003 will be on income support and will be transferred to pension credit without a fresh set of procedures, whereas in 2008 they will all be asked to produce further details or there will be a discussion with the Pension Service as to whether their benefit should be modified. I was puzzled because if it was necessary to make that special provision for 2008, I am not sure that there may not also be a problem in 2003, when the benefit comes on-stream. 
 It is true that many of those people will already be on an income-related benefit such as income support and they will transfer to the new benefit. However, if we consider the mass of claimants in October 2003 and compare that with the potential mass of the re-claimants in 2008, it becomes clear that during that time many of them will have made a fresh application anyway if their incomes have declined or they have had another change of circumstances. Others—perhaps this is the most extreme change of circumstance—will sadly have died during the period. Others will go through the process for the second time during their life as a pensioner. The Minister should explain what the weight of cases may be between the two. The system may require changes, or people may be allowed further time in 2008 because of the rush of claims. I am concerned that the initial claims in 2003 will also overload the system, especially as they will be on an old computer system that may not be able to cope. Amendment No. 34 probes that issue, and I hope that the Minister will respond. 
 On amendment No. 36, I hope that the Minister can assure us that any extension of the period will not be to the detriment of the individual. We will not press the matter to a vote, but would like the Minister's assurance about what is going on. Even if everything is lickety-split, and there is no loss to the claimant, there is a danger that if the claimant has not received a form from it, the Pension Service may not pick up the fact that he or she is entitled to more benefit. As we know, there is a qualifying period for making claims for benefit. Someone may not have had contact with the Pension Service for the perfectly good reason of administrative overload. I am anxious that they should get back what they would have had within the usual five-year cycle if they had been invited to apply and had done so. 
 Mr. McCartney: Clause 13 provides the Government with a power to regulate the smooth transfer of pensioners from the current system of financial support and income support to a state pension credit. The probing amendment gives us an opportunity to set out the transitional arrangements in some detail. This is a massive exercise, and enacting the Bill is the easy part, if hon. Members do not mind me saying so. I reassure the Committee that a great deal of effort has been spent on the implementation strategy, and a great human and financial resources have been made available to ensure the smooth operation of pension credit in a rolling programme over the next few years to access the system. I shall write to the hon. Gentleman and to the hon. Member for Northavon if they want regular updates. It is in all our interests that the system is open and transparent.

Tim Boswell: I want to put on record that I would appreciate, as I am sure that the hon. Member for Northavon would, a continuing briefing on the matter. As the Minister rightly says, it is in the interests of everyone, especially our constituents and pensioners, to know what is going on and what the plans are for the service.

Ian McCartney: I thank the hon. Gentleman. If he hears nothing, he should not surmise that there is a problem. He will have to trust me to get in touch with him with information that is not just a regurgitation or re-spin of what was said before. We will let him know where we are up to as we make progress.
 During the transition period, we need to be able to transfer the 1.8 million people who qualify for state pension credit from the existing income support system, so that there is no interruption to their income. We intend to make regulations that will enable them to be treated as having made a claim for state pension credit. They will be notified of their new entitlement and will have the normal right to ask for a review or appeal. This proposal will remove the need for them to make a separate claim and so minimise bureaucracy and ensure continuity of payment. 
 We will introduce arrangements that will enable staff in the Department for Work and Pensions to recalculate these cases before October 2003 and arrange payments of state pension credit from the appropriate date. That answers one of the points that the hon. Member for Daventry made about the bulge in 2003–2004. In addition, there are 6.3 million households with someone aged 60 and over of whom we estimate some 2.4 million could be entitled to pension credit. We will systematically identify and contact them over the 18-month period from April 2003 to October 2004 to ensure they know what to do to take up their entitlement. We will make provision in the regulations that will allow backdating of the payment of pension credit to the start date in October 2003 if an application is made by October 2004 so that no pensioner need lose out.

Tim Boswell: Let us make it absolutely clear—I do not think that I dissent from the Minister. Everyone will have been contacted by October 2004 so there is no question of anyone not having a chance to get the credit and having it run backdated from October 2003.
 Mr. McCartney: That is why we are taking advance claims.
 Subsection 2 (b) provides that regulations may also allow for an assessed income period in excess of five years where a person has reached the qualifying age when state pension credit is introduced. We expect that the circumstances of the vast majority of people, both existing minimum income guarantee recipients and take-on cases, who are over 65 will be settled and so a five-year income assessment period, starting from A-Day—the first date of implementation—would normally apply. 
 All the rules for setting and maintaining assessed income periods under clauses 6 to 10 continue to apply. Claimants would be able to ask for their pension credit entitlement to be re-determined under clause 8, so I can assure the Committee that amendment No. 34 is not needed. All those five-year periods would start from October 2003 and that would create a potential peak of reviews in October 2008. Setting a different period will help us to even out the work load in a manageable way, avoiding the operational problems that could otherwise occur five years after the introduction of the credits. 
 We have considered carefully how best to manage those arrangements and propose to carry out this large review task over a two-year period between 2008 and 2010. This will mean that pensioners awarded pension credit in the first year and, who would otherwise have an assessed income period of five years, will instead have an assessed income period of anything from five to seven years, which goes back to a point made by the hon. Member for Northavon. 
 Amendment No. 36 would prevent us from setting longer periods in those cases. That would mean either that the Pension Service would have to undertake an unmanageable number of reviews in 2008 or we would have to set shorter periods and carry out the extra work in the early years of implementation when we expect it to be concentrating on maximising take-up. That is the choice that we have had to make. Both jobs are not doable at the same time and there is no point in trying to claim that they are. Most people would welcome our decision, which gets them into the system and enables them to receive pension credit.

Steve Webb: The business of backdating to October 2003 is tremendously welcome. It is a helpful thing that has come from the Committee. Those on income support have not been asked for some of the information that they will have to provide for their savings credit to be calculated such as, for example, the uprating rules that apply to their occupational pensions. Will they get a letter telling them about the new thing coming in in October and asking them for that information? Although they will not be making a fresh claim in one sense, they will be asked for extra information and that will happen in that six-month period.

Ian McCartney: The hon. Gentleman asks a very fair question. As soon as the Bill receives Royal Assent, we will start approaching those people, who will transfer to the pension credit. As soon as the Bill is
 signed, sealed and delivered, that process will commence, and as soon as it does, we will notify hon. Members of that.
 Amendment No. 36 would prevent us setting longer periods in such cases and make them unmanageable. I went on to say that we were concentrating on maximising the take-up. That is the judgment that has to be made, and we have made it. Given the two scenarios that I set out, pensioners' organisations would have wanted us to make that judgment. Assessed income periods are being introduced to reduce the burden on pensioners of reporting changes. Longer periods would generally work to the claimant's advantage. 
 The hon. Member for Daventry raised a couple of other points. First, on IT, for the next sitting, I will give him a copy of a letter that I had to send to Computing magazine, which ran a front-page scare story about our IT system for pensioner credit. It was a rather disingenuous story. My letter set out a rebuttal of that, but also reassurances. The hon. Gentleman might find reassurance in the statement made about IT by the Secretary of State, debating another matter in the House. My hon. Friend the Under-Secretary and I take seriously the issue of IT implementation and want to have an open and transparent strategy about it. Across the piece, Governments of whatever hue have had problems with IT. When I was in the Cabinet Office, I was made responsible for sorting those out, so it is all down to me. 
 I give the hon. Member for Northavon reassurance that we are designing the system to use spare capacity. For the introduction of pension credit, we will use capacity that we transferred out to other systems. Rigorous, properly managed programmes will be put in place at every stage, including risk assessment and timetables for implementation and testing. All of that is part of the preparations for the introduction in 2003.

Tim Boswell: I am grateful to the Minister for saying that he is genuinely trying to help the Committee. However, given the read-across to the difficulties in introducing the new formula for child support that I am sure he had in mind, will he assure the Committee that if a problem were to develop—even if he thinks that it will not—in the implementation of pension credit for the scheduled date of October 2003, he and the Secretary of State will take an early opportunity to report that to the House? I think that it would be the general view of most Members, rather shown by the case of child support, that it is far better to get it right and implement it, than to half-implement it and get off on the wrong foot.

Ian McCartney: I understand what the hon. Gentleman is saying. If he hears that I have left the country, he will know that there is a problem.
 It is all a matter of transparency. We discussed that with the stakeholders in the Department. Obviously, we built into the design of the IT systems periods for testing and, once testing is reviewed, periods to make the changes. Again, I assure the hon. Gentleman that a rigorous process is in place to ensure that we have robust measures to minimise risk and to apply testing. 
 Testing will take place during a period of months, not a period of days. We will not just decide the weekend before the launch to have a live check of the system and see how it goes. Those days are over, but there used to be occasions when projects were not even tested in the weekend before they went live; they just pressed the button and hoped that things went well. The system has radically changed, and a very robust system has been put in place for the delivery of the credit in October 2003. 
 The hon. Gentleman also asked whether anyone would lose out when a longer assessed period was set. The answer is no, because of the win-win situation. The claimant can always ask about changes to his or her entitlement provision, which will result in an increase of pension credit entitlement. As a result of the phased introduction, there is no potential loss to the individual concerned. I hope that those explanations will allow the hon. Gentleman to withdraw his amendment.

Tim Boswell: I am grateful to the Minister, who has helpfully explained some complicated administrative issues to the Committee. I do not think that he will dissent if I say that it is very much in pensioners' interests that we get the scheme right. We wish him godspeed in getting on with the job of informing pensioners so that take-up of the new benefit can take place as soon as possible and the detached savings credit—if I may put it like that—can be handled as soon as possible. I hope that the computer system works. If I were he, I would be keeping my fingers crossed, but I shall not ask him to get up and confirm, so that it is in Hansard, that he will be doing that.
 I shall rehearse one area on which the Minister commented usefully, to check that I have understood the figures aright. He said that, in respect of pensioners, claims transferring from income support and the minimum income guarantee would be in the order of 1.8 million and that there would be, on the Department's estimation, a further 2.4 million household claims for pension credit. I evince no surprise at the fact that that is broadly consistent with the reply that he gave me in a written answer on Monday 22 April. He said then that about 4.1 million pensioner households would be entitled to pension credit, of which about 1.2 million contained a couple. We can allow for rounding and assume that we are talking about the same figures. 
 I understood the Minister to say that 6.3 million households have a person aged over 60 in them. [Interruption.] Sorry, a person aged 60 or over. That is not necessarily the total number entitled to pension credit, but the total number of households with such a person. However, the Minister gave a figure of about 4.1 million pensioner households that are entitled to pension credit. Albeit that is households not numbers of people, if there are 6.3 million households altogether that include persons over 60—they might not necessarily yet be aged 65—if I do some broad maths in my head, it seems that roughly two thirds of households containing a person aged over 60 are likely to be sucked into the pension credit scheme ab initio. To bring back a rather more controversial phrase, the 
 involvement in means-testing will therefore be about two thirds from the start, not later.

Steve Webb: If I followed the Minister's figures correctly, the 6.3 million was the number of households containing someone aged over 60 apart from the 2 million already getting income support and who will be brought into the scheme. The figure should not, therefore, be two thirds.

Ian McCartney: Absolutely.

Tim Boswell: I am grateful for that elucidation. I had, perhaps, not entirely picked up that point. However, the Minister has performed a service to the Committee in explaining how the scheme is to work and, roughly, its scope.
 I hardly need tell the Minister this, but there is a huge administrative task to be done. It is very important that it gets off on the right foot and works from day one. Anything done sensibly to increase the possibility of that is to be welcomed in the interests of pensioners. Some of the assurances that the Minister has given, the thinking that he has exposed and his readiness to share developments with us as they take place are welcome. Our little exchanges have been useful. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave withdrawn. 
 Clause 13 ordered to stand part of the Bill.

Clause 14 - Minor and consequential amendments

Question proposed, That the clause stand part of the Bill.

Maria Eagle: Clause 14 is another straightforward clause, which introduces schedule 2. I do not propose to detain the Committee any longer than it takes me to sit down at this moment.
 Question put and agreed to. 
 Clause 14 ordered to stand part of the Bill.

Clause 15 - Income and Capital

Steve Webb: I beg to move amendment No. 38, in page 9, line 22, at end insert—
'(3A) In the case of income from earnings, the amount of qualifying income shall be increased by an amount to be prescribed in regulations, for the purpose of entitlement to savings credit.'.
 We now come by means of amendment No. 38 to provoke and prompt discussion about the treatment of earnings which, for reasons that the Committee understands, we were not able to do at an earlier stage. The amendment is an attempt to think about how we might approach the issue of encouraging people, particularly those who have just passed the age of 60 or 65, to stay on in or do paid work for as long as possible. I will say a little more about the specifics of amendment No. 38 and what we were trying to do by it—it might have some eccentric consequences. The Select Committee on Work and Pensions raised the 
 issue of the treatment of earnings, and it would be helpful to hear the Government's thinking on it. 
 The Select Committee was concerned that the opportunity was being missed to encourage people to do paid work for longer. We are not talking about forcing people to work full-time until they drop but about flexible retirement and enabling people to work past the traditional fixed pension ages. The Government's policy is that that is a good thing. It is demonstrated by discussions on flexible retirement and the Cabinet Office report on winning the generation game. In general, the Government are encouraging people who are willing to work longer, and I support that goal. 
 The question is whether the Bill is doing enough or whether it is a missed opportunity. In a specific way, amendment No. 38 tries to help and encourage people to work, but let me explain the difficulty in trying to use the pension credit for that purpose. There are two components: the guarantee credit and the savings credit. To some extent, they work in opposite directions because, as in the case of income support, a pound is lost under the guarantee credit for every pound earned beyond the disregard. That remains the case in the Bill. Nothing has happened in the guarantee credit element to encourage earnings, unless there are plans for changes to disregards in regulations, but we are not aware of any. 
 Can we use the savings credit to reward earnings? The question is whether the Government have done so. Earnings are to be treated in the same way as private pensions, although the Select Committee report said that the disregard on earnings that applies to the guarantee credit will also apply to the savings credit. I hope that the Minister will correct me if I am wrong on that, but it is the way that the Select Committee wrote it up. If I earn £15, only £10 will be taken into account for the guarantee credit, and only £10 will be taken into account for the savings credit. That is my reading of what the Select Committee said. I do not know whether it is right. 
 Obviously, the problem is that the savings credit rewards pensions but rewards earnings up to a maximum amount. If the pension is £77 and the minimum income guarantee is £100, earnings up to £23—or £23 after a disregard—are rewarded in full up to the 60 per cent. maximum and then the reward starts to fall away down to zero at £135 of total income. 
 The amendment is trying to achieve for people with very small earnings an increased reward under the savings credit for slightly higher earnings. To give a simple example, someone with a basic pension of £77 and earnings of £10 will get a reward under the savings credit for the £10, leaving aside the disregard. The amendment would add an amount, set in regulations, to the £10 to increase the sort of thing that the savings credit rewards. That is what we were trying to do. I am not 100 per cent. convinced that we have achieved it, but that is where we were coming from. Very small amounts of earnings would be topped up through the savings credit. By regulation we would add, fake or deem some earnings to give more savings credit and thus reward very small amounts of earnings. 
 Obviously, that would only apply up to £23 a week, including whatever reward we gave to people. Beyond that point, giving them something under amendment No. 38 would actually reduce the savings credit, so I would be the first to admit that it simply probes the earnings issue and that it may have some peculiar consequences that we might not want. 
 The simplest way to reward earnings is to take them out of the savings credit altogether and just have a socking great disregard on the guarantee credit element. I am straying ever so slightly, but for reasons that I hope are apparent. One way of rewarding earnings is to use the mechanism of the savings credit but, arguably, the simpler way would be to forget counting earnings for savings credit and simply have a socking great disregard such as the Select Committee recommended, of, for example, £40 a week. People would receive up to £40 extra for working. 
 When the Secretary of State gave evidence to the Select Committee, he was asked about earnings and said that he did not foresee any changes. I do not wish to pursue the issue at length at this stage, but I wish to mention that this is an opportunity for the Government to deliver on their agenda of encouraging people to work a bit longer and to have a phased, not a cliff-edge, retirement by giving them a reward such as some pension from the Government. Amendment No. 38 is one way in which we can reward them; disregards are another, and those will achieve something through the Bill that fits in with a Government agenda that I, and I suspect the Conservatives, happen to share. If we do nothing, we may miss an opportunity. We have not heard enough from the Government on that.

James Clappison: The hon. Gentleman is right to draw attention to the importance of the clause. We must carefully consider whether it will make people more or less willing to work part-time after they have retired, and I hope that the Under-Secretary can allay the several concerns that I have.
 I listened carefully to the hon. Gentleman and I have read the words of Baroness Hollis. It seems that the Government's intention is to treat earnings the same as savings, subject to a disregard of £5 for single people and £10 for couples.

Tim Boswell: When the Secretary of State was asked about that point on Second Reading by my hon. Friend the Member for Havant (Mr. Willetts), his response was:
''I specifically said that we propose to treat income from work in the same way as money from occupational pensions or savings.''—[Official Report, 25 March 2002; Vol. 382, c. 617.]
 That is unequivocal as regards his intentions.

James Clappison: My hon. Friend is absolutely right about that. Earlier, Baroness Hollis had said much the same thing in the House of Lords by taking the example of Alfred, aged 68, who was married to Vera, aged 65. Vera's age seemed convenient for the Baroness' purposes because the incentives to work, the effect of the minimum income guarantee and the withdrawals from MIG—which would be the same for
 earnings as for occupational pensions or savings—would have an interesting impact for any lady aged between 60 and 65 who wanted to take on part-time work having retired at 60.
 The Veras of this world who wanted to work a morning or a day a week would keep the first £5 of their earnings, but if they were entitled only to the basic state pension, the remainder of their income would be withdrawn from their MIG at a 100 per cent. rate pound for pound. I believe that that is what will follow if the two systems are to work in the same way. One wonders what effect that would have on the incentive to go out to work. How would people feel about having their income withdrawn at a 100 per cent. rate for the first £5?

Tim Boswell: I have no intention of barracking throughout my hon. Friend's speech, or of delivering it for him, but does he agree that any work is likely to incur expenses that are not normally requited in the formula, and that that would be a further disincentive to employment when returns are so low, or even negative?

James Clappison: My hon. Friend makes a fair point. People always have small expenses, such as bus fares, and £5 is not much to cover them. The same applies to other people who have a 100 per cent. withdrawal rate and who are entitled to MIG—for example, someone with an incomplete pension record.
 A lady aged 60 who took on part-time work could look forward to receiving savings credit when she reached 65, to having her income treated as though it were savings under savings credit, and to being entitled to a withdrawal rate of 60p in the pound. By the age of 65, she might feel a little less like going out to work than when she was 60. In any case, a substantial part of her earnings would have been already withdrawn from her. In effect, the difference that her work would make would be much less than it would otherwise be. In those circumstances, one wonders what the effect will be on incentives to go out and work. In a way, that is the same as incentives to save, with which we have identified a problem with the pension credit, although that takes place much earlier in life and there is a certain amount of uncertainty attached to it. It is difficult for people to see exactly what the position will be. 
 Someone in the position that I have described knows exactly what will happen if they go out to work and are in receipt of the pension credit—their money will be withdrawn pound for pound. I wonder whether that will create an incentive to save. If one looks very carefully at the figures, and even if one takes the lower rate, rather than the 100 per cent. rate, of withdrawal that applies to the savings credit, one finds that the returns from having worked will be fairly low compared with what they would have been when someone could simply stay at home and receive the £100 minimum income guarantee. Anyone considering whether to go out to work will compare what they would obtain from their work with their position if they did not work. 
 The rewards will be pretty meagre, especially for people who are doing work at or near the minimum 
 wage. They would be working for much less than the minimum wage once the withdrawal had been taken into account. We need to hear from the Under-Secretary on that because I, for one, will take a bit of convincing that someone who will be able to keep only £5 of what they earn, and who will see the remainder of their earnings withdrawn pound for pound or substantially taken away from them, will not have much of an incentive to go out to work.

James Purnell: I welcome the fact that the hon. Member for Northavon has brought up an important issue. It is worth emphasising that the Bill improves the situation for people who are earning in the sense that, as has just been said, they will be able to keep 60 per cent. of their earnings if they are entitled to the basic state pension. For those people, it is an improvement on the previous situation under both income support and the minimum income guarantee.
 The agenda to raise the effective retirement age by encouraging people to work longer and to have an active retirement is important. The measures on anti-discrimination that the Government are planning to pursue are central to that. Unless I am mistaken, the Select Committee recommended looking into the cost of that. I have been told that if one took an extreme line, it would end up costing up to £500 million. If one disregards all earnings, that may be excessive, but it is an issue in which we should not jump too quickly. We need to work out how it fits into the overall pattern of raising activity in retirement, so I urge the Government to view it in that light.

Andrew Selous: I echo the comments made by my hon. Friends about the importance of encouraging pensioners to pursue an active retirement. The hon. Member for Stalybridge and Hyde (James Purnell) is right to comment that the Select Committee report referred to the need to look into the cost of that, and it would be irresponsible not to investigate it. When the Under-Secretary responds, perhaps the Committee can be given some information on the likely cost of that particular course of action.
 There is a great deal of discrimination against older people. For example, they do not benefit from unfair dismissal legislation when they work. We have heard that the Government intend to tackle that area, but I understand that that will not be for several years and may not come from this House. I urge the Ministers to investigate that route. 
 The £40 disregard proposed by the Select Committee was particularly recommended by Age Concern, which gave evidence to the Committee. It would mean that many pensioners could do a day's work without suffering a 40 per cent. tax rate, which many of them will find fairly steep. Significant numbers of them are not higher-rate taxpayers and have been used to a 22 per cent. tax rate. A 40 per cent. tax rate on all their earnings above £5 would act as a considerable disincentive. I hope that the Under-Secretary will give the Committee some encouragement on that issue. 
 Maria Eagle: This is obviously a good probing amendment as it has hon. Members leaping up on both sides of the Committee. I congratulate the hon. Member for Northavon on introducing it, and on having the candour to admit that he spotted a few of the somewhat perverse effects that it would have. He has had a stab at tackling the issue, and has decided that it is quite difficult to do.
 The amendment would give pension credit recipients with earnings a higher savings credit than those without earnings, by increasing the amount of qualifying income for those with earnings. However, the savings credit is calculated by multiplying the amount of qualifying income by 60 per cent., with a maximum cap of £13.80 for single people and £18.60 for couples. The hon. Gentleman's amendment does not change the value of the maximum savings credit. 
 The hon. Gentleman is right to say that some of the amendment's effects would be perverse. For example, it would give a qualifying income to those with incomes below the savings credit threshold. They would therefore have the right to a savings credit, which is an added complication when he is calling for simplicity. However, he made the fair point that he tabled the amendment because he wanted to consider how earnings are treated. We know that the country depends on older workers. As the demography changes, that dependency is likely to grow. Currently, 50 per cent. of men and 25 per cent. of women aged 60 to 64 work, as do a further 800,000 people aged 65 and over. The way that we treat earnings is therefore important. 
 We value the work that older people put into not just their jobs but handing on skills and creating an intergenerational mix in the workplace. Those are the valuable social gains made through people who work later on in life. I certainly have no intention of packing up when I am 60 or 65, and I have said so before. I am sure that many hon. Members feel the same and do not want to retire.

Ian McCartney: Speak for yourself. I am off.

Maria Eagle: Clearly, not everyone in the Committee feels as I do.
 The Government are committed to promoting opportunities for older workers and are trying to reward them for their earnings. I have set out the case against amendment No. 38 in some detail, and I do not want to press those criticisms. However, I should say that it considers how earnings should be treated. The hon. Member for Hertsmere talked about women aged between 60 and 64 who work. He again made the point about the 100 per cent. marginal deduction rate that we encountered earlier. The amendment, too, would cause some people to have a 100 per cent. marginal deduction rate, because the hon. Member for Northavon has not suggested changing the maximum savings credit. The situation is unchanged, and we have come back to the subject of creating gender fairness in the general pension system. 
 The hon. Member for Daventry made a point about travelling to work. In considering earnings, we have chosen to carry forward income support disregards. The disregard will apply after deducting the cost of 
 travel to work. There are therefore some benefits to considering the matter in respect of disregards. The proposed system does not change the current system.

James Clappison: As my hon. Friend the Member for Daventry said, what the hon. Lady refers to as the present system is what has been created by the minimum income guarantee. The question is whether the proposal goes far enough in remedying the minimum income guarantee. Will not the situation become increasingly worse as the gap grows between the minimum income guarantee, or the pension credit, growing in line with earnings, and the basic state pension? Will not more people fall into the trap and have a reduced incentive to work or save?

Maria Eagle: As I have said before, the hon. Gentleman seems to believe that making provision for dealing with poverty among current pensioners is a massive disincentive to save for people of working age. Pension systems must be fair in how they treat today's and tomorrow's pensioners. There must be intergenerational fairness and regard. We cannot simply leave people in penury today in order to ensure that there is an incentive for people to save for tomorrow.
 We believe that the working tax credit, together with the abolition of some of the rules relating to work and pension credit, such as the 16-hour rule, and bringing forward existing disregards for income-related benefits, is the best way to promote active ageing and reward earnings. The hon. Member for Northavon is right. For the guarantee credit, the first £5 of a single pensioner's earnings will be disregarded; for couples, the first £10; for carers and disabled pensioners, the first £20. In addition, working pensioners could receive a savings credit of a further £13.80 if single, or £18.60 if a couple, because earnings count as qualifying income.

Steve Webb: I apologise. The Under-Secretary may have been about to make this point. Does the same disregard rule apply to the savings credit, or are all earnings counted for the savings credit?

Maria Eagle: Is the hon. Gentleman asking whether there are two £5 disregards?

Steve Webb: I am asking whether, if I earn £15, I am treated for assessment for both the guarantee credit and the savings credit as having earnings of £10, or as having £10 for the MIG and £15 for the savings credit.

Maria Eagle: There is only one earnings disregard. My officials will pass me a note. They are nodding. That is taken into account at the appropriate stage of the overall calculation. I hope that that is clear. I shall be happy to speak to the hon. Gentleman further if he is not happy with what I have said.
 I shall give a couple of examples of how the provision will work in practice in order to show that the earnings disregards will result in real gains to working pensioners. Let us take the example of a man aged 66 who works a day a week at a local supermarket and receives a minimum wage of £35. He has a full basic retirement pension of £77 and no other income. That is a typical example. Taking into 
 account the £5 disregard, his relevant earnings are £30. His combined income of £77 retirement pension and £30 earnings takes him above the level of the guarantee credit of £100. However, he is entitled to savings credit, as his earnings count as qualifying income. Therefore his savings credit is £11. That will give him a total weekly income of £123—£77 retirement pension, £35 earnings plus £11 pension credit. A man in such circumstances would receive nothing from the present MIG scheme, but with pension credit he is £11 better off—because of his earnings, despite the fact that we are dealing with only a £5 disregard. 
 To give another example, involving a couple, one partner works for two days a week and earns £65. The gentleman is aged 68 and is married to a lady aged 65. She works as a cleaner two days a week on the minimum wage and earns £65. They receive a full couple rate retirement pension of £123 and have no other income. They are entitled to a £10 disregard on Mary's earnings, making £55 relevant to the pension credit assessment. Their combined income, of £123 retirement pension and £55 earnings, takes them above the guarantee credit level of £154, but they are entitled to a savings credit as the lady's earnings count as qualifying income, and their savings credit is £9. They therefore have a total weekly income of £197—£123 retirement pension, plus £65 earnings plus £9 pension credit. Again, the couple would receive nothing under the present MIG, but they will be £9 a week better off because of pension credit. Therefore it is not true to say that in such circumstances it does not pay to continue to work. 
 Those are fairly typical instances of the types of job that people will consider. We want to reward earnings, which is why they are included as qualifying income for the savings credit, but we believe that that is best done through disregards. We will obviously review them annually. The hon. Member for Northavon has already said of his amendment that it was probing rather than being something to which he was wedded, and I hope that he will consider withdrawing it.

Steve Webb: The Under-Secretary's reply was helpful in clarifying the disregard, which clearly applies throughout. The earnings figure is net of the disregard and is applied throughout the calculation.
 The hon. Member for Hertsmere made a good point, but it is the root of our debate about incentives to save or to work. The Government's line is that they have helped the poor, and thereby created a situation whereas, if they had done nothing, there would be nothing to save or to earn. The Bill partially remedies that problem by giving people some reward for earning and some reward for saving. 
 The counter strategy would have been to have put people clear of means-testing—I use that term in a non-pejorative way, in a technical sense—and everything that they earn would then have been theirs to keep instead of a tapered amount as in this system; likewise anything that they had saved would have been theirs to keep. I prefer that strategy, but it is beyond the amendment.

James Clappison: Will the hon. Gentleman give way?
 Mr. Webb: I shall give way in a moment. If someone is making a marginal decision about whether to do small amounts of work, costs other than travel-to-work costs might be involved. If the margins on whether to work are fairly borderline, keeping only 60 per cent. of the net benefit of working might lead them to wonder whether it was worth working. The question before the Committee is whether the Government have gone far enough in rewarding work. In my view, the simpler system would have been to have left earnings out of the savings credit and had a nice, neat, clean disregard. People would then have much better off.

James Clappison: The hon. Gentleman has actually come to the point on which I intended to intervene. I may not have the details right, but the Under-Secretary gave an example of a single person earning £35 for part-time work, the credit raising it to £123. In taking marginal decisions about whether to work, that person would be looking at the difference between what they earn and what they would receive if they did not bother to work, which would have been £100. The difference is £23 rather than £35, which is the full value of the work; if they were being paid the minimum wage, the difference would be substantially less than the minimum wage itself. That person would be wondering whether it was worth going out to work.

Steve Webb: There is a certain amount of truth in that. Those who are earning £35 receive £23 benefit for it, so they are effectively facing a marginal tax rate of about a third. That is above the typical basic rate of tax; at that level of income, they would not expect to pay tax at all. The Minister might say that that is better than nothing, but it may still represent a missed opportunity for people who are looking at £35 jobs who would still not be inclined to take them. In a sense we should be considering those people who are not working who have been put off by the 100 per cent. marginal rate and who have not been sufficiently induced back to work by the 60 per cent. marginal rate.
 I shall not labour the point unduly. To use a technical drafting term, my amendment is a complete botch. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Tim Boswell: The clause contains a lot of meat, not all of which has been amended. I sense that the Committee would like to make progress tonight and I am relaxed about that. Today, I have put forward some alternative suggestions and concepts. I hope that they will commend themselves to those who select our amendments in due course, and that we shall have an opportunity to return to them before the end of the Bill. The rather dry terms of the clause make it difficult to amend but easy to comment on.
 I should like to take up a point that was initiated by the Minister of State who is, I happen to know, a touch younger than I am. I must defer to the hon. Member for Hamilton, South (Mr. Tynan), whose birth date I recently checked in ''Dod's Parliamentary Companion''. He is already, by definition, in the household of a person aged over 60. I congratulate 
 him on that and declare to the Committee, if I have not already done so, my interest in reaching that age later this year. [Interruption.] 
 I note that the Under-Secretary is worried about how long I intend to go on. I can assure her that, in the words of Baroness Thatcher, I might go on and on—but not tonight. However, I hope that I can provide a contemporary reference, because some of us do not spend all Sunday night thinking about the Bill. It is probably fair to say that this Committee would divide itself into two: a minority of those who can, and a majority who possibly cannot, or choose to claim not to, remember ''The Forsyte Saga'' the first time around. I should make it clear that I am in the former category, but I am doing my best to watch it this time around. Probably it is not as good, because ''they don't make 'em like that any more'', but that is another debate for another occasion. 
 The reference to the Forsytes is germane to subsection (6). I have gone through the Bill and applied what I might loosely call the Soames test. By that I do not refer to my hon. Friend the Member for Mid-Sussex (Mr. Soames); I mean the Soames Forsyte test. I can perfectly imagine him assenting to the propositions that circumstances might be prescribed in which a person is treated as possessing capital or income that he does not possess, although he would be a bit sceptical about it. In particular, clause 15(6)(b) talks about circumstances in which 
''Capital or income which a person does possess is to be disregarded''.
 That might suit him. I find it difficult to see how either Soames or any of our Victorian forebears would have felt easy with the assertion in clause 15(6)(c): 
''Income is to be treated as capital'',
 or that in 15(6)(d): 
''Capital is to be treated as income''.
 That way, Soames would have seen ruin. I comment on that briefly because it is about the extreme liberality of the drafting of the clause, which allows Ministers to do more or less whatever they want. They will be, if not constrained, at least influenced by debates that have taken place here and in another place. 
 However, I must say to Ministers in all seriousness that the comments of Help the Aged are nothing if not terse. Equally, they are nothing if not dismissive. They read: 
''Capital is shabbily treated and equity released has no locus.''
 Help the Aged is concerned about some of the detail of the clause. I do not want to rehearse earlier debates and I am aware, although I did not participate in them, that there was some exchange this morning—going back to subsection (1)—about the interaction of earnings and the working tax credit. Ministers may want to comment on that in relation to subsection (1). 
 We have had an interesting debate on earnings, but I would like to reserve my fire for one or two other matters to which we may return—for example, the concern expressed by Help the Aged about the clause. The organisation asks which of the prescribed social security benefits mentioned in clause 15(1)(e) will count as income and whether winter fuel payments or 
 the schemes covering transport concessions or television licences are included. 
 More serious is the issue of deemed income from capital and the principle basis on which that is to be determined. That is set out tersely in subsection (2) and referred to again in subsection (3), which states: 
''Income and capital shall be calculated or estimated in such manner as may be prescribed.''
 I am a connoisseur of generalised or permissive legislation, but I do not remember seeing anything as permissive as that before. The measure bears on the overall number of areas or heads of income that may be included. We should feel easier if we could be sure that Ministers had completed their list and knew whether they might want to add to it in the light of events. That is not an inherently unreasonable request. 
 At least two areas will require elucidation. The issue of tax privilege schemes such as tax-exempt special savings accounts was discussed in another place, but I do not know whether Ministers have got any further in their thoughts on it. As pensioners have been put outwith the tax system by legislation, it is a pity to reinsert them into the withdrawal of benefits represented by the savings credit and not to treat their income as being entirely outwith. Furthermore, who will be able to produce a 10 per cent. return on capital from any asset at the moment? No doubt Ministers will tell us that benefits derive from the possession of capital, but the implicit rate is very high, may well be inappropriate and may remain inappropriate for several years. 
 We should discuss those matters because the provision is amazingly general. It displays an ability to turn income into capital or capital into income and represents a remarkably constructive use of legislation, even from a new Labour Government. It is not far from a general enabling Act, but we shall not go into that. Other concepts and interactions remain unclear, such as those between earnings and working tax credit. There is much to do before we can feel comfortable that the system will work at least half-sensibly and is reasonably fair in its treatment of the interests of the various parties.

John Mann: I shall make a few comments on the issue of capital. I listened with interest to the hon. Member for Daventry, to whose 60th birthday celebrations I trust we midlands Members shall be invited. I look forward to the invitation.
 The hon. Gentleman said that his accountant dealt with his own capital, and referred to how he spent his Sunday evenings. I spend my Sunday evenings not reading this or any other Bill but in the company of pensioners at Manton miners welfare organisation. [Interruption.] I suspect that there are no polygamous retired miners, and there are very few lottery winners. That matter has been mentioned in relation to capital, but the lottery winners are easily identified and not secret, whether they want to be or not. There are several people there with shares, and I note that those with shares are acutely aware of every change in circumstance that the Government bring to bear on them, every proposed change, to the penny, and the 
 daily changes in share values. I am regaled every Sunday evening with the latest long faces over British Telecom shares, which were especially popular among some. Those who failed to sell at an appropriate time are waiting, optimistically, for the share value to rise. 
 That group of retired miners will be perfectly capable of working through any entitlement with great gusto, but they are the minority. I want to raise the major, significant change that is affecting many retired people in my constituency, and will affect others across the country. By the Department of Trade and Industry's projections, there will be a net influx to pensioners of £200 million, during the next 18 months to two years, in compensation for retired miners. That is a significant amount of money for one constituency. It is unquestionably the single biggest redistribution of wealth that there has ever been in that community. In my constituency, 8,500 claims have already been put in. As some of those are dual claims, that equates to approximately 7,000 households, more than 90 per cent. of the claims being from living retired miners. That will be a significant increase in capital. 
 On my reading of the Bill, there is no particular issue for the ministerial team to apply their minds to in relation to that. However, I urge one point. There should be deliberations with the Department for Trade and Industry over the giving of advice, at the appropriate time, on the change in legislation. Those who are to benefit—those who suffered from what is in essence a historic legacy of bad employment practices that damaged people's health chronically, often through no fault of their own, and who are now rightly being compensated—should be given accurate information on exactly how the change in legislation will affect them. About 18 months ago, the DTI wrote to every one of the applicants across the country, so it has full records. As such a database and mailing list exist, there must be some discussion, at departmental or ministerial level, between the two Departments to ensure that those people—the large numbers in my constituency and the many across the rest of the coalfields—get accurate information on changes in circumstance. 
 I am encouraging the Government, with some success, to let that money flow immediately. The problem might well be rectified in advance. My call to my constituents is to spend, spend, spend: spend for Bassetlaw and spend for Britain. They are doing so, with some gusto: the number of travel agents in the high streets demonstrates that, although I am not sure if my constituents are going abroad for more than four weeks. There might be particular advice to be given to them on that. Many of them are spending the money, boosting the local and national economy in advance of the changes. Nevertheless, I suspect that some will not do that. I hope that some specific advice can be given to that large, important group of pensioners, who will be receiving a rightful boost to their capital during the period in which the Bill is becoming law.

Steve Webb: I am not sure that I can follow the local colour of the hon. Member for Bassetlaw (John Mann). It is back to nitpicking mode, I am afraid. Will the Minister clarify two aspects of the clause when she responds? If I read clause 15(1)(b) correctly, it
 implies that income from the working tax credit will be treated—I am picking up on what the hon. Member for Daventry said—as income for the pension tax credit. Even saying that makes one slightly twitchy.
 There is no upper age limit on the working tax credit as I understand it. Therefore, someone in a household with low earnings topped up by one means-tested tax credit could find that another part of the system means-tests that means-tested tax credit, and takes a sum away, presumably at 100 per cent. in the case of the MIG. It will reward that person for 60 per cent. of their earnings, but it has already rewarded them through the working tax credit. One starts to descend into a complete fog in such circumstances. If it is foggy for us, how must the claimant feel to be told that they will be rewarded for earnings through working tax credit, when the partner who presumably is over pension age says, ''Sorry dear, your reward for working is coming off my reward for saving''? I wonder whether there is a case for a clean break whereby a household is either a working tax credit or pension credit case, but not both simultaneously. That sounds awful. 
 My second question returns to my intervention concerning annuities. Whoever drafted the Bill has clearly gone to enormous trouble to differentiate between several different types. In clause 15, we have income from annuity contracts under subsection (1)(d), but under subsection (1)(c) we have retirement pension income, which refers to the definition in clause 16 that identifies several different types of annuity separately. Why have the draftsmen gone to this trouble? Will any type of annuity be treated differently for the purposes of the pension credit? The Minister of State, responding this morning, said that there are different types of annuity, one of which is covered under the definition of retirement pension income and another of which is covered under the definition of income from annuity contracts.

Ian McCartney: I apologise for intervening in the Under-Secretary's debate. Given that I raised the question earlier and asked the hon. Gentleman to think about my words, I will write to him through the Committee Chair, so that everyone will get a copy. We are not going to resolve the matter in the way that the hon. Gentleman wants. I have been honest about what it concerns. If he wants more information, I will do that by letter.

Steve Webb: I am grateful to the Minister. I have no intention of making life difficult. I hope that I have just clarified what I am unclear about. There are all those different types of annuities throughout the Bill. Some come under one heading, some come under the other, and I do not understand whether the distinctions are significant. One assumes that if they were not significant, they would not be in the Bill, but I cannot quite see under what circumstances the differences might apply.

Tim Boswell: I seek only to assist the debate. The hon. Gentleman is right to raise his concern about the different categories, but I suspect that one of reasons for them might be the fact that, as the Government's
 consultation paper on annuities makes clear, about 5 per cent. of the total volume of annuities are purchased as a matter of discretion, and where the retirement is contingent rather than essential to the category in question.

Steve Webb: I am grateful for that intervention. I would not dream of second-guessing the Minister's reply, but I am sure that it will be to our benefit. I will not seek any response from the Under-Secretary to that point. I would be grateful for some clarification on my point about whether people with modest earnings will receive a top-up from the working tax credit, and find it taken away by another system. That seems such a nightmare; why could we not have a clean break between the two systems?

Andrew Selous: I want to touch on the question of equity release from pensioners' houses. Most pensioners do not have substantial savings, but increasingly, many own the houses that they live in. We need further clarification of the Bill's treatment of pensioners who either sell their houses or manage to release some equity from them through several schemes that are increasingly publicised among pensioner groups.
 It is particularly unjust that the 10 per cent. return on capital is deemed to apply to equity release. Pensioners who have saved all their lives to buy their home will find it unjust when they discover that their income is deemed to be based on a 10 per cent. rate. Mervyn Kohler, head of public affairs at Help the Aged, highlighted that point to the Select Committee. Will the Minister clarify the position?

Maria Eagle: Clause 15, in setting out what counts as income for the purpose of the legislation, is an important part of the Bill. That sounds easy, but as one would expect, our debate has shown that there are many issues of concern. I shall attempt to deal with some of the points that have been raised in the debate.
 The clause sets out the income to be taken into account in the calculation. Without that, subsections (2) and (3) could not operate. It also sets out the basis of how we intend to treat certain types of income and capital in the assessment. I hope that members of the Committee will recognise some of its good aspects. For example, the provisions abolish the rules that exclude pensioners with £12,000 or more of savings from any help at all. Savings below £6,000 will also be disregarded. In assessing the imputed 10 per cent. return, hon. Members should not forget the disregard, which can affect the final amount. It takes out the first £6,000 of any savings, and we reckon that about 85 per cent. of pensioners will not have to report any capital at all. The income that they receive from savings will be ignored entirely. 
 The assumed rate of return of £1 for every £500 of savings above £6,000 will halve the current rate, and the Committee should acknowledge that improvement. As hon. Members will know, we initially considered examining actual income, but decided after consultations and representations that it would be simpler, easier and fairer to do it in this alternative way. We are improving the current position 
 by halving the current rate of return, and as I said, the disregards mean that many people will not have to worry about assumed income at all. In addition, we should not forget that such income will be rewarded through the savings credit—another offsetting consideration. Overall, savings will be treated five times more generously than under the minimum income guarantee. 
 Clause 15 also protects the position of payments made to people in exceptional circumstances. For example, we intend to ignore attendance allowance and disability living allowance, which are designed to meet the extra costs of disability. We also intend to recognise the special nature of certain payments, such as war pensions, by not taking account of the first £10 in the assessment. I hope that members of the Committee will be pleased with such aspects of the clause. It allows for flexibility, which is I how I would choose to put it, though the hon. Member for Daventry probably believes that it takes liberties.

Tim Boswell: I would like a precise answer to a question that I posed obliquely about winter fuel payments—and what about free television licences for the over–75s; do they score?

Maria Eagle: They do not count as income. Under the old MIG rules there was an onus on the claimant to report all kinds of little streams of income. We are setting out on the face of the Bill what counts as income: things that are not mentioned there are not included. That is probably a clearer way of doing things, and is consistent with the fact that we do not expect people to report minuscule changes on a weekly basis.
 The hon. Gentleman raised some points about subsection (6) and capital being treated as income and income being treated as capital. He made some comments about parliamentary counsel with which I have some sympathy. With a lawyer in the family he will understand why lawyers do that kind of thing, but perhaps I can give him an example. First, the flexibility is carried over from income support. There is nothing new. We are not suddenly stating in legislation that we might sometimes treat income as capital and capital as income. The practice is carried over from income support, to make sense of some of the more obscure forms of both and to put the treatment beyond doubt and thus avoid tangles over how things should be dealt with. 
 My right hon. Friend Baroness Hollis of Heigham, gave an example in the other place. She said that the power to prescribe in regulations the circumstances in which income is to be treated as capital 
''would be used in circumstances when a payment that is regularly received, or is made in relation to a particular period, should not be treated as income; for example, a pensioner may have loaned a relative some money which he or she is repaying monthly by instalments. Although it would be regular monthly income, it clearly would be in respect of capital and, therefore, we would want it to be treated as such.''—[Official Report, House of Lords, 29 January 2002; Vol. 631, c. 192.]
 By making that clear in the Bill, we can deal sensibly with issues that are by their nature small and unusual. 
 I hope that that deals with what the hon. Gentleman said about subsection (6). He made some 
 points about personal equity plans, TESSAs and other tax-advantaged savings. There is a notional income from capital and there is the disregard, but we would not want to ignore capital savings. We do not want to put incentives in the system by completely ignoring things such as tax-free savings, which would allow one type of capital to be treated differently from any other kind for the purposes of the calculation. 
 My hon. Friend the Member for Bassetlaw, apart from urging his constituents to spend all their money, referred to information for those who might come into some money in due course as a result of a personal or industrial injury. That is an important point. We considering how such matters should be treated but we have not made final decisions yet. Those will come through in the regulations, but it is important that when people who are not used to having a lot of money come into money they receive good advice about the implications of dealing with the money in certain ways. We take on board what my hon. Friend said.

Ian McCartney: Except ''Spend, spend, spend.''

Maria Eagle: My hon. Friend the Member for Bassetlaw will no doubt have to answer to his constituents for making such comments.
 I hope that I have dealt with the points that have been raised.

Steve Webb: Will the Under-Secretary address the point about working tax credit?

Maria Eagle: I did not address that point specifically. Working tax credit is in the Bill, so it is to be included as income. I can say that clearly. One of the main reasons for including it is that that will prevent pensioners who are already receiving the working tax credit from being paid by the state again to meet the same needs. We are back to the point about double provision. We might not agree with it, but we all realise that the rule against double provision has always been a cornerstone of the welfare state. Now I am starting to repeat myself from our debates on earlier clauses, so I shall stop there. I hope that I have dealt with all the points that have been made.
 Question put and agreed to. 
 Clause 15 ordered to stand part of the Bill.

Clause 16 - Retirement pension income

Question proposed, That the clause stand part of the Bill.

Tim Boswell: We now come to the narrower concept of retirement pension income. I appreciate the Under-Secretary's elucidation of the wider concepts of income in clause 15. I am content with her approach, which is to specify the heads for income, including, if necessary, a get-out clause to deal with anything that we have not thought of, or abuses of the system. It is more comfortable for pensioners to be able to carry out a mental checklist and say, ''I have none of the above,'' than to be caught out. As I conceded earlier, it is right that there should be a fallback provision, as set out in subsection (2), which is that amendments may be made
 by regulation to subsection (1) to add or vary something, or to delete anything that no longer seems appropriate. The Committee heard examples of the complexities even of retirement income in our exchanges on annuities, and I shall not repeat them.
 As I shall say when we come to clause 17, the inference to be drawn from clauses 16 and 17, and from clause 19, which gives the details of regulations, is that the regulations will be made by negative resolution. That may be appropriate, but given the complexities—such as the fact that some people may be stakeholders, and the different kinds of income that may fall within the measure—can Ministers assure us that they will usually carry out consultations before introducing such regulations? A possible exception to consultation would be the discovery of a clear abuse that is escalating fast; for example, if someone finds a scheme that he then markets and people take it up at an inordinate rate. In such circumstances, Ministers may wish to regulate first and consult afterwards to stop the loss of revenue and the abuse of the system. Subject only to that reservation, there is everything to be gained by Ministers taking a considered view and consulting experts and interested parties if they need to redefine the heads under which retirement income is established. I hope that they will bear that in mind and give us the assurances that we want.

Ian McCartney: I shall not speak for long on the clause, which is best described as a sort of subsection of clause 15. It was drafted as a separate clause to give a better structure to the Bill and to make it more manageable.
 I gave a long list of details about the income relevant to guarantee calculation in clause 15 and earlier clauses, and on what will be treated as income, or treated as income and ignored. Details of qualifying income were also stated. There is no need for further debate about some of the issues, because although they impact on this clause, they were discussed by my hon. Friend the Under-Secretary on clause 15. 
 Clause 16 is a belt-and-braces clause, which defines what we mean by retirement pension income. The definition covers both state and private pension provision and is an important link to clauses 6 and 10. We discussed in detail that family of clauses and their interrelationship. 
 In general, pensioners, especially those aged 65 and over, have a settled and regular retirement pension income that is not subject to frequent changes. Therefore, there is little point in constantly asking them about changes to that income, as such questions are intrusive and may be demeaning. We debated the subject at length, with gusto, during an earlier sitting; we also discussed the idea of pensioners not having to report changes in their income for up to five years. 
 The clause underpins our commitment to fixed assessments. Pensioners will not usually need to report, which makes transparent the operation of the pension credit and the assessed income period. The clause includes powers to add to, vary or remove descriptions in the list of requirements for pension 
 income. The list is flexible, to allow it to be amended and to remain relevant. The pension industry may come up with new products that are not yet defined, but that would benefit us in the process of assessing pension income. It is therefore important to keep that flexibility. 
 As for consultation, we are required to consult the Social Security Advisory Committee, but we would do so in any event. The hon. Member for Daventry reasonably asked if there would be a fuller firmer process outside that consultation. Rather than give a disingenuous reply, I shall say no. However, that does not mean a diminution of our commitment to consultation, as stakeholder groups have been established alongside pensioners organisations to consult on the implementation strategy. Regulations are, of course, critical to that strategy. I reassure the hon. Gentleman that we will consult as fully as we can. 
 Question put and agreed to. 
 Clause 16 ordered to stand part of the Bill.

Clause 17 - Other interpretation provisions

Question proposed, That the clause stand part of the Bill.

Tim Boswell: I draw the Committee's attention to subsection (2), which, as often happens, comes a long way after subsection (1). Subsection (2) relates to regulation-making powers. The Under-Secretary helpfully reminded the Committee that he proposes to keep in touch with various stakeholder groups. That is entirely welcome. It is not the most productive system to have to consult formally on everything, and I would prefer him to have a continuing dialogue. I do not seek to draw a distinction there—although I would draw a distinction in connection with my previous intervention on clause 16.
 Help the Aged has flagged up an issue that relates to subsection (2). In its characteristically economic way, it says: 
''The two definitions to which this refers need more clarification, and should not be left to regulation by straightforward statutory instruments.''
 We could have an interesting theological discussion about what an unstraightforward statutory instrument is, or whether there is such a thing as a straightforward statutory instrument. However, we all know what Help the Aged means. It does not want the definitions to be passed into law without consultation. That is even more important for the definition of income in clause 16, to which I briefly referred. 
 There is the sensitive issue of who is and is not in the same household. As the Committee will remember, I referred to Help the Aged's briefing about what is and is not cohabitation, and what is and is not a benefit unit. It would be helpful to have the Under-Secretary's assurance that the Government will consult on that. 
 There is also an issue about severe disability. I am involved with disability interests, and we should record that there will be an uplift for severely disabled 
 persons. The statutory instrument concerned will shortly be subject to a prayer procedure, and the Under-Secretary will realise the importance of the definitions of severe disability and their implications, especially in borderline cases. Given the vulnerability of such people, they should be handled as sensitively as possible. I am not looking for trouble in advance. However, I hope that the Under-Secretary will take on board the need for the closest possible consultation, so that she can ensure that all possible angles are explored before regulations are made. She must ensure that what she rightly intends to be a helpful set of provisions will not give rise to any recriminations on the grounds that they have not been fully considered.

Maria Eagle: I will do what I can to reassure the hon. Gentleman in that respect.
 Clause 17 is largely the interpretation provision. I shall not go through all the definitions, because we would be here all night if I did. In any case, I gather that there is not huge disquiet about them, or amendments galore would have been tabled. Subsection (1) defines the terms used in the Bill in a way that fits in with other legislation. Subsection (2) confers the power to prescribe in regulations the circumstances in which people are to be treated as members of the same household, or as severely disabled. 
 The hon. Gentleman asked about consultation and our intentions. We intend any regulations made under the powers to mirror those that currently apply to income support. Of course, there are the usual consultation procedures in respect of both matters; we always want to hear what people have to say. 
 Again, subsection (3) is technical. It ensures that this legislation ties in with the main body of social security legislation and does not float around on its 
 own. The clause is technical, but without it we would not be able to deal with the Bill. I hope that, on the basis of my remarks, hon. Members will agree that clause 17 should stand part of the Bill. 
 Question put and agreed to. 
 Clause 17 ordered to stand part of the Bill. 
 Clauses 18 to 21 ordered to stand part of the Bill.

Clause 22 - Short title, commencement and extent

Ian McCartney: I beg to move amendment No. 8, in page 14, line 23, leave out subsection (7).
 This amendment removes the privilege amendment that was made in another place. As hon. Members will be aware, the financial powers in the other place are restricted by the rights and privileges of the House of Commons and by the terms of the Parliament Acts. As the Bill originated in another place and contains financial provisions, a privilege amendment was added to it before its introduction in this House to ensure that the financial privilege of this House was not infringed, 
 The privilege amendment provided that nothing in the Bill should impose or vary any charge on the people or public funds. This amendment is technical; it is necessary to remove the privilege amendment. The financial provisions are thereby reinstated. 
 Amendment agreed to. 
 Clause 22, as amended, ordered to stand part of the Bill. 
 Further consideration adjourned.—[Angela Smith.] 
 Adjourned accordingly at eight minutes past Seven o'clock till Thursday 25 April at half-past Nine o'clock.